One week before Congress was set to adjourn, and seven weeks before a presidential election that could dramatically change national policies, Wall Street and its media allies have decided to grasp another bag of goodies yet from the Bush presidency: a $700 billion taxpayer bailout of the once high-flying financial services industry. That’s right. The same Wall Street players whose greed created our economic crisis now want the taxpayers to pick up the tab. And like the Republican political operatives who went down to Florida in the days following the 2000 election and created an astroturf “base” opposed to a recount, so is Wall Street drumming up a false hysteria that claims that “regular folks” are demanding the bailout’s prompt approval.
Barack Obama strongly responded to the Republican plan by setting forth seven principles for a bailout that progressives could support. But some wonder whether Obama and fellow Democrats will stand firm, or simply talk tough and improve the plan around the edges. The answer could reveal much about an Obama presidency, and whether Democrats in 2009 will push for the “change we need” rather than reforms easily won.
You’ve got to hand it to the folks who pocketed billions of dollars while running the United States economy into the ground: They have never stopped daring to dream. But their latest dream—a $700 billion taxpayer bailout of their debt—is a nightmare for the nation and poses a strong test for Barack Obama and the Democratic Party’s commitment to real change.
The Bailout for dummies
Rather than try to understand “mortgage-backed securities,” “deleveraging,” or the valuation of potentially worthless debt, the bailout can best be understood as a political strategy by Republicans and their Wall Street allies to maintain control of the nation’s economy despite the Democratic Party’s likely control of the White House and Congress starting in 2009.
Simply put, this is a power grab. It is a power grab cloaked, as all such moves are, in the language of serving the common good. It is also accompanied by a genuine economic crisis that demands action—but not this week, and not when Bush and his gang will be out of the loop in a little over three months.
What a remarkable coincidence! In Congress’ last week in session before the November election, the Bush administration and its Treasury secretary from Goldman Sachs has announced that action must be taken NOW! to prevent tens of millions of Americans from losing their jobs, life savings, and life as they once knew it.
Didn’t we learn after 9/11 about the dangers of capitulating to such scare tactics?
Why would anyone trust those who got us in this mess to get us out?
And while the media frames Treasury Secretary Henry Paulson as an “independent” oracle of financial truths, he made hundreds of millions of dollars at Goldman Sachs from deregulation, and will be going back to Wall Street in a few short months.
Why should Paulson be viewed as anything other than a lobbyist for Wall Street?
What if political roles were reversed?
As the November 1980 election approached, interest rates were at record levels, inflation was raging and there was a pervasive sense of economic crisis. How would Wall Street, the media, the Reagan presidential campaign and the Republican Party have responded if in September the Carter administration demanded passage of a sweeping new economic program, involving spending hundreds of billions of public funds?
You know the answer. Reagan and the Republican Party would have gone ballistic, and accused Carter of playing politics.
And the media would have agreed with the Republican framing, and attacked Carter’s motives.
But today’s media has disconnected the Bush administration’s ideology and political agenda from its bailout plan. The media would have the public believe that these free-market Republicans are only embracing a taxpayer bailout as a last resort, rather than as their last chance to loot from the public trough.
Republicans would never back a Democratic economic plan on the eve of an election that Democrats were likely to lose. Yet Republicans are asking Democrats to pass a Republican plan just before voters kick everyone associated with the Bush administration out of office; that’s how the Karl Roves of the world define “bipartisanship.”
Test for Obama, Democrats
The bailout had barely been announced when Obama skeptics like David Sirota criticized the nominee for allegedly aligning with Wall Street, and against “Change.” Obama issued a strong progressive analysis of the bailout in Charlotte on Sunday, and Nancy Pelosi and other Democratic leaders have also issued strong challenges to the plan.
But there is a pervasive view among activists that when push comes to shove, the Democrats cave on tax, finance and budget issues. Barack Obama vowed to be different, and people’s faith in his commitment to change explains why he has created the largest grassroots presidential campaign in the nation’s history.
The bailout plan puts Obama’s principles to the test. If he continues to demand that any bailout helps homeowners facing foreclosure, limits executive compensation, and addresses the problems of rising gas prices, unemployment, and the economic problems impacting Main Street, his base will be more galvanized than ever.
But if Obama abandons these principles to show himself a “team player,” or is seen as playing good cop-bad cop with Democrats in Congress, who would pass a bad bill over Obama’s public objections, than the excitement around the Obama campaign will decline.
Obama and the Democrats gain nothing by rushing to give the Bush administration $700 billion to spend as it pleases. But such support would be like a kick to the stomach to those inspired by Obama’s promise to bring change.
And it would be foolish politics. Republicans will use Obama’s support of a flawed bailout to accuse him of being a tool of Wall Street, and a false messenger of change.
Barack Obama is too smart and principled to fall into this trap. And to make sure fellow Democrats join him, call the office of your local representative and tell the receptionist in less than 30 seconds why their boss should oppose the bailout.
Randy Shaw is editor of BeyondChron.org and author of the just released Beyond the Fields: Cesar Chavez, the UFW and the Struggle for Justice in the 21st Century (University of California Press).